Power Tool Market Fight Still Dogging Home Depot

SAN FRANCISCO (CN) – Home Depot must face claims that it illegally restrained trade, but the power tools suppliers it allegedly made deals with are off the hook, a federal judge ruled. In a December 2012 complaint, Orchard Supply Hardware claimed that Milwaukee Electric Tool Company (METCo) and Makita cut off its supply of power tools shortly after Home Depot announced that it would take steps to lock down the supply of professional power tools. Orchard claimed the move would significantly hurt its business, as a retail hardware store needs access to tools made by both METCo and Makita. Its federal lawsuit accused the companies of conferring with each other to cease sales to Orchard, Amazon and other Home Depot competitors, citing violations of the Sherman Act; its California counterpart, the Cartwright Act; and California’s unfair competition law. U.S. District Judge Jon Tigar had dismissed the case for failure to state a claim in April, but said in a tentative ruling last month that Orchard Supply could pursue some claims against Home Depot. Finalizing that decision last week, Tigar said Orchard could not prove that METCo and Makita, which control roughly half of the market for professional power tools, coordinated efforts to block Orchard from competing with Home Depot. Tigar found the anti-competitive effect of the suppliers’ agreements could not be combined, as each had a separate agreement with Home Depot. “Aggregating the effect of the METCo-Home Depot agreement and the Makita-Home Depot agreement is appropriate for the purpose of showing the defendant Home Depot’s conduct was anticompetitive,” the 23-page opinion states. “The court agrees with defendants, however, that it is inappropriate to aggregate the two vertical agreements in evaluating whether METCo and Makita’s conduct was anti-competitive. METCo and Makita each separately made an agreement with Home Depot. Orchard does not contend that, taken individually, these contracts have an anticompetitive effect. Because Orchard has not pled any facts about either agreement individually, it cannot meet its burden to prove those agreements are anti-competitive.” The seven surviving claims against Home Depot allege violations of the Sherman Act and the Lanham Act.